Delegates
convened in working groups for most of the day, but met briefly in an
afternoon Joint Working Group to discuss the status of observers in the
working groups. Working Group I (WGI) discussed preambular recitals and
general issues relating to Chapters 1-4. Working Group II (WGII) met to
discuss, inter alia, the chapter on finance.

WORKING GROUP I

INDONESIA,
supported by MALAYSIA, queried whether observers should be allowed to
participate. UNCTAD said that, unless the conference decides otherwise,
the Rules of Procedure allow observers to participate, but not vote.
After a brief hiatus, it was decided that a joint working group would
convene in the afternoon to discuss this issue.

PREAMBLE: On a recital referring to
previous economic initiatives, NIGERIA noted that a reference to the
Cartagena Commitment had not been captured in the proposed text. The US
said the Spirit of São Paulo agreed to at UNCTAD XI could serve as a
replacement reference. CAMEROON, supported by MALAYSIA, said that
references to both the Cartagena Commitment and the São Paulo Consensus
should be included. The REPUBLIC OF CONGO, supported by PERU, asked for
clarification on the difference between the two commitments. At the end
of the day, the UNCTAD Secretariat explained the difference.

SURINAME
said that too many preambular clauses would dilute the focus of the
successor agreement. NORWAY requested a reference to workers’ rights in
the preamble. CHINA said a concise preamble would simplify the
agreement.

On a
strategy for achieving international trade in tropical timber from
sustainably managed sources, MALAYSIA, supported by PAPUA NEW GUINEA,
CAMEROON, BRAZIL, GABON, the REPUBLIC OF KOREA, NORWAY, and NIGERIA,
said the reference should not be changed or moved. The EUROPEAN
COMMUNITY (EC) said that wording on ITTO Objective 2000 in a subsequent
recital would capture this reference. The US accepted the original
reference, but said it might return to it after the recital on ITTO
Objective 2000 had been discussed.

On a
recital referring to other processes and agreements, NORWAY, with
SWITZERLAND, proposed unbracketing language on the Convention on
Biological Diversity. The US, with SWITZERLAND and PAPUA NEW GUINEA,
proposed deleting “forest-related multilateral environmental and trade
agreements.” CHINA, supported by COLOMBIA, stressed the Johannesburg
Declaration, the Forest Principles, and the UN Forum on Forests. INDIA
called for a reference to other processes that have incorporated SFM.

INDIA,
with NORWAY, CHINA, SWITZERLAND, and EGYPT, favored a proposal on the
importance of NTFPs. SWITZERLAND also favored including forest-related
environmental services. The EU, with NIGERIA, INDONESIA, and MALAYSIA
preferred the ITTA, 1994’s focus on the economic importance of timber.
BRAZIL suggested mentioning NTFPs “in the context of SFM.” The REPUBLIC
OF CONGO, supported by PANAMA, suggested merging language on NTFPs into
a later paragraph on economic benefits to communities.

On a
recital relating to the multiple goods and services provided by forests,
the US preferred text highlighting the benefits provided by forests, and
proposed adding language on poverty alleviation, the Millennium
Declaration and references to NTFPs and ecological services. The US
proposed including, and GABON proposed bracketing, “trade in forest
products.”

COSTA RICA
requested replacing a reference to “goods and services” with language on
the multiple “benefits” from forests.

SWITZERLAND, NEW ZEALAND, the EC and CHINA supported the recital on the
multiple roles of forests. NEW ZEALAND, supported by CHINA and EGYPT,
and opposed by CAMEROON, proposed removing a reference to people. CHINA
and the EC proposed including references to the Millennium Development
Goals (MDGs). NORWAY proposed including a reference to NTFPs. The EC
emphasized the multiple roles, as opposed to aspects, of forests, and
proposed leaving a reference to trade in brackets. SWITZERLAND proposed
removing, and CHINA proposed keeping, “related to trade.” BRAZIL and
INDONESIA said that the recitals on the multiple roles and benefits of
forests added too many obligations and should be dropped.

On a
recital on criteria and indicators (C&I), NEW ZEALAND, opposed by PERU,
suggested deleting reference to “comparable” C&Is. INDONESIA, with the
US and JAPAN, suggested specifying management of all types of forests as
an important tool for members to assess, monitor, and promote progress
toward SFM. NIGERIA suggested “C&I for SFM” as important tools for
assessing “management for all types of forests.” INDIA favored deleting
language on “assessment, monitoring, and promoting” progress toward SFM.
GABON favored focusing on tropical forests.

On a
paragraph on previous commitments, NIGERIA, supported by CAMEROON,
INDONESIA, GABON, and the REPUBLIC OF CONGO, and opposed by the US,
favored ITTA, 1994 language recognizing the principle of new and
additional financial resources. The US, supported by SWITZERLAND, noted
the new “ITTO Objective 2000” label. MALAYSIA urged that the mutual
commitments for both producers and consumers be reaffirmed.

CAMEROON
opposed, but the US, NEW ZEALAND and the EU favored, a recital
recognizing the importance of collaboration. The US, with the EU and
PERU, favored “including indigenous and local communities.” NORWAY, with
SWITZERLAND, suggested adding a reference to indigenous “peoples.” NEW
ZEALAND suggested referring to “civil society” only. COLOMBIA preferred
referring to “other major groups of stakeholders.”

ARTICLE 1 (Objectives): SWITZERLAND called for
language on illegal logging and related trade. BRAZIL called for
referring to ITTO Objective 2000 as the basis of the whole agreement
and, supported by CHINA, including wording on funding for SFM.

WORKING GROUP II

ARTICLE 38 (Signature, Ratification, Acceptance and Approval): The UNCTAD legal advisor provided a new proposal that
would enable the EC to sign the successor agreement on behalf of all EU
member states. Since the proposal entailed options for a single EC
ratification or both EC and EU member state ratification, the EU said
they would need time to consider the proposal.

ARTICLE 17 (Privileges and Immunities): The
Article on privileges and immunities was approved without amendments.

ARTICLE 18 (Financial Accounts): The US, NEW
ZEALAND and CANADA emphasized that ITTO should not be a development
organization, and should retain its focus on commodities. The US noted
that SFM financing in producer countries will need to be generated by
domestic and foreign investment, including from the private sector.
MALAYSIA noted that the ITTA, 1994 is the baseline for work, and that
more resources are required for the Bali Partnership Fund and
Administrative Account. CANADA asserted that ITTO should move away from
project-based work and that its work can be simplified. The US,
supported by CÔTE D’IVOIRE and SWITZERLAND, suggested keeping the
reference to the Bali Partnership Fund. JAPAN, NORWAY and SWITZERLAND,
and opposed by the EU, suggested retaining the reference to the proposed
work programme account. The EU, supported by CANADA, suggested that the
objectives of the Administrative Account should be specified. MALAYSIA
insisted that the convergence of interests and commitments in
implementing SFM should be met with adequate financial resources,
expressed concern over producer countries’ financial burden in
implementing SFM and emphasized that ITTO should continue to fund
projects.

ARTICLE 19 (Administrative Account): BRAZIL
expressed the importance of examining the structure of the various
models. The EU, opposed by JAPAN, proposed that policy work in support
of key Council functions be included, and insisted on maintaining an
emphasis on biennial budgeting. The US proposed inserting language
stating that members that have not paid their assessments in full for
two consecutive years will be ineligible to submit projects and
pre-projects for funding consideration. On approval of the budget,
SWITZERLAND proposed replacing references to “every two years” with
“financial biennium,” CANADA proposed “financial year” and the EU
proposed “financial exercise.”

APPENDIX I (Proposed Financial Models): BRAZIL
said discussions on the financial models should focus on: multilateral
versus bilateral, earmarked versus non-earmarked, and assessed versus
voluntary funding. JAPAN reported on the past levels of voluntary
funding based on net imports of roundwood equivalent, indicating that it
could not continue giving the same levels of contributions in the
future, and urged more consumer countries to make voluntary
contributions, referring in particular to the Republic of Korea, China
and the EU. While the EU, the REPUBLIC OF KOREA and CHINA thanked Japan
for its continued contributions, they noted that voluntary contributions
based on net imports were not an accurate indicator of how much
countries should be contributing voluntarily. The REPUBLIC OF KOREA, the
EU, the US and NEW ZEALAND supported maintaining the current structure
of accounts. NORWAY and JAPAN supported adding a work programme account, which would require contributions based on GDP, to
the current structure of accounts. MALAYSIA, on behalf of the Producer
Caucus, said it was flexible on the specific financial model but noted
that the model containing the work programme account and Bali
Partnership Fund should serve as the basis for negotiation.

ARTICLE 20 (Special Account): The EU requested
enhancing of the role of the Executive Director in facilitating the
development of project proposals. Noting that financial rules must be
incorporated in the new agreement, the EU proposed that such rules
should guarantee transparent management and administration of the
Special Account. Noting that such financial considerations are already
covered earlier in the chapter on finances, JAPAN, supported by CANADA,
opposed restating the importance of the financial rules for each
account. Preferring to keep all financial clauses together, the EU,
supported by the US, opposed moving the paragraph on loans for project
financing. The US said that member state liability for pre-project and
project funding should relate to any action undertaken during projects
and pre-projects and not just for borrowing or lending activities. The US, opposed by the EU, proposed language
noting that Council should decide what to do with the remainder of
unearmarked project funds, instead of directly returning them to the
contributor. SWITZERLAND said the allocation of remaining project funds
should be decided by the contributor.

ARTICLE 21 (Bali Partnership Fund): Cï¿½TE
D'IVOIRE preferred moving funds remaining from completed projects from
the Special Account to the Bali Partnership Fund. The EU and SWITZERLAND
noted that this additional language could contradict previous paragraphs
on how unused project and pre-project funds are managed. The US,
supported by the EU, indicated that 100 percent of income earned from
activities related to the Special Account should be included in the Bali
Partnership Fund. INDONESIA suggested a reference stating that only
consumer members should contribute to the Fund. MALAYSIA reminded that the purpose of the Bali Partnership Fund, which
is for the promotion of SFM in meeting ITTO Objective 2000, is different
from that of the Special Account, which promotes SFM, forest industry
and forest development activities.

JOINT WORKING GROUP

Concerning
Indonesiaï¿½s query in Working Group I about the participation of
observers in working groups, WGII Chair Blaser, in his capacity as
Vice-President of the Conference, announced that for the duration of the
day observers would be permitted to sit in the working groups, but not
speak. He then invited the two caucuses to discuss the issue and report
back to Plenary on Wednesday, 28 July.

IN THE CORRIDORS

Many
delegates are concerned that the query concerning the participation of
observers in the working groups overlooks the unique institutional
culture that has developed within ITTO over the last decade, and in so
doing, has the potential to roll back a decadeï¿½s worth of goodwill. Less
catastrophic, others have suggested that, while the proposal might not
be sensitive to ITTO politics, it nevertheless represents a potential
opportunity to educate the ï¿½commodities communityï¿½ about the evolving
social and ecological contexts within which commodities are traded.

THINGS TO LOOK FOR TODAY

PLENARY: Delegates are scheduled to convene in
Salle XXVI at 10:00 am to hear progress reports from the working groups.

WORKING GROUPS I AND II: Immediately following
the Plenary, Working Group I will resume its deliberations in Salle XXV
on Chapters 1-4, while Working Group II will resume its deliberations in
Salle XXVI on Chapters 5-11.

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